Running a successful private dental practice requires meticulous organization and planning, especially concerning finances. Implementing prudent financial strategies can contribute to your success.
Here are some practical steps to implement.
One of the first steps to financial stability is establishing organized bookkeeping practices.
Record all income, expenses, assets, liabilities, and equity in a bookkeeping system. QuickBooks is user-friendly accounting software commonly used by small businesses. Link your practice's bank accounts to QuickBooks to automatically import transactions and reconcile accounts.
Hire a Bookkeeper and an Accountant
A bookkeeper can keep track of your financial records, including income, expenses, and cash flow, and help your practice stay organized and compliant with tax laws and regulations.
By taking care of the day-to-day financial tasks, like invoicing, bill payment, and payroll, a bookkeeper can free up your time to focus on providing high-quality dental care to your patients.
An accountant provides financial expertise and guidance tailored to your dental practice. They handle essential tasks like payroll, tax preparation, financial statement generation, and long-term projections based on your goals.
Your accountant can help analyze your profitability, maximize tax savings, prepare for an audit, and navigate a practice merger or sale. They can advise on ideal business structures, equipment financing, and managing practice debt.
Look for individuals who have experience working with dental practices and understand the unique financial aspects of the industry. They should know dental billing codes, insurance reimbursements, and tax laws related to dental practices.
A good resource for finding a dentist knowledgeable in the business of dentistry is the Academy of Dental CPAs.
Check their credentials, references, and previous work experience. Consider their fees and ensure they are reasonable and within your budget.
Create an Operating Budget
An operating budget is essential for managing cash flow and planning for expenses.
List projected monthly revenue based on past income and expected growth. Budget for recurring overhead like rent, payroll, supplies, utilities, insurance, loan payments, and other fixed costs.
Factor in variable expenses like equipment repairs, marketing, professional fees, and discretionary spending. Build in reserve funds for emergencies and slow periods.
Compare actual monthly revenue and expenses to your budget to identify areas for improvement. Tweak your operating budget annually or quarterly as your practice evolves.
Implement Billing Best Practices
Implement best billing practices to keep your cash flow healthy.
Verify patient insurance eligibility and benefits before an office visit. Submit claims with proper coding to reduce denials and delays in payment. Follow up on unpaid or underpaid claims.
Collect patient payments at the time of service when possible. Consider outsourcing billing to a reputable third-party company if managing it in-house is too cumbersome.
Choose the Right Practice Management Software
Practice management software centralizes patient scheduling, charting, treatment planning, billing, reporting, and other workflows into one integrated system. Select software that fits your
needs and budget.
Patient portals, insurance claim automation, digital charting, clinical decision support, and custom reporting are key features.
Quality software enhances organization, productivity, profitability, and the patient experience.
Budget for costs for software subscriptions, training, and upgrades.
Perform Accounts Receivable Management
Make decreasing accounts receivable a daily goal.
Prevent cash flow interruptions by closely monitoring accounts receivable (AR). The AR aging report breaks down unpaid patient balances by age, showing how long invoices have been outstanding.
Follow up with patients promptly about unpaid balances to determine reasons for the delay and collect payment.
Offer discounts for paying in full upfront or within 30 days.
Flag patients with poor payment history for prepayment or restricted treatment plans.
Turn over severely delinquent accounts to a collections agency as a last resort.
Take Advantage of Tax Deductions
Most dental expenses like supplies, lab fees, staff wages, utilities, dental equipment, licensing fees, and insurance premiums are deductible business expenses. You can also deduct a portion of dental office space used in your home.
Consult with your accountant about additional deductions, like health insurance premiums, retirement plan contributions, and depreciation on significant assets.
Automate Payroll Processing
As your staff grows, consider outsourcing payroll to a provider like Gusto, Paychex, or ADP. They seamlessly process paychecks, tax withholdings, filings and payments, retirement contributions, and other payroll functions, saving you administrative time while reducing errors.
Institute Strict Financial Controls
Protect your bottom line by instituting strict financial policies and procedures.
Perform cash reconciliations daily to match cash on hand to revenue. Require employees to provide receipts and justification for purchases to be reimbursed. Limit check signing authority to you or your office manager.
Implement dual control for significant transactions.
Conduct regular audits of financial records to verify accuracy. Restrict access to financial data and the practice management system. Install security cameras to deter theft.
Adopt Frugal Spending Habits
Scrutinize every expense to see where you can cut back.
Renegotiate contracts with vendors to get better rates. Buy dental supplies in bulk online at wholesale prices. Invest in durable equipment and tools that provide years of use. Incentivize staff to be mindful of resource use, like turning off lights and minimizing paper. Avoid lavish renovations or decor.
Save for Major Purchases
As your practice grows, you will need to invest in significant purchases like new dental equipment, office space, and technology upgrades. Rather than funding these significant, irregular expenses through loans or credit, build savings over time to pay with cash.
Open a separate high-yield savings account dedicated to your practice savings fund. Automate monthly or quarterly transfers from your operating accounts into savings.
You can run your dental practice with confidence and peace of mind by mastering these financial skills. You can also enjoy the rewards of your hard work and provide the best possible care to your patients.